Open Borders: Secretary Clinton's Call for Energy Trading

During the third presidential debate, former Secretary of State Hillary Clinton argued “We trade more energy with our neighbors than we trade with the rest of the world combined. And I do want us to have an electric grid, an energy system that crosses borders.” If Secretary Clinton wins the presidency, how would this ‘cross-border’ energy work and what are the benefits?

Well first it is important to note a more simplistic version of this idea, trading of electricity across borders, is not a new idea and can hardly be called a Clinton Campaign or democratic creation. The U.S., Mexico, and Canada already traded electrons daily and have done so for years. EIA data reports that in 2015, the US imported 68.4 million MWh of electricity from Canada composed of mostly hydropower and 1.7 million MWh from Mexico, while sending approximately 10.3 million MWh back to Canada and Mexico. Europe’s efforts to slowly integrate their electricity markets across member states are well known and as Africa modernizes its power system, there are ongoing efforts to connect regional power authorities across country borders.

The reason? Integration of power grids, that cross borders comes with numerous benefits. For example, the World Bank suggests that cross-border electricity trading can help bring down energy prices, mitigate against power shocks, relieve shortages, facilitate decarbonization, and provide incentives for market extension and integration. While the bipartisan think tank Resources for the Future argues that harmonized North American energy system that trades energy, shares information and integrates policy can assist with emissions reductions, reduce overall energy system transaction costs and help energy markets reach greater market access and system efficiency gains.

Secretary Clinton’s proposed plan seeks to capture these benefits by exchanging ideas, technology and infrastructure to build a better-coordinated grid that will help accelerate clean technology. This is a continuation of President Obama’s policies, who reached an agreement this past summer with the leaders of Canada and Mexico to produce half of the North American continents power by 2025 from hydropower, nuclear, wind, solar and energy storage.

Due to the intermittency of renewable resources like solar and wind, it’s well known that the integration of regional markets can help with the expansion of renewables. For some time, California has strived to develop a regional market that can trade energy with neighboring states efficiently. California determined it will be difficult to reach their low carbon goals without this trading. Meanwhile, Europe learned cross-border trading and integration can help align supply and demand. For example, in Central Europe, many new grid development projects focus on interconnection with neighboring countries in order to bring power supply from places of abundance to areas of scarcity. It’s clear that in order to build a cleaner, cheaper grid, setting aside regional differences and trading electricity is the future.